USD -The USD begins the week lower against all of its major counterparts after Greek policymakers passed austerity measures needed to secure their second bailout package. However, the initial euphoria has eased as investors are taking the USD's surge lower as an opportunity to add long?dollar positions. The underlying fundamentals for a strong dollar are little changed as Europe surely faces further debt woes and the world's largest economies struggle grow. Domestically, investors are focused on President Obama's budget plans for 2012, which are targeting a fiscal deficit reduction from 8.5% of GDP to 5.5% of GDP in 2013. The plan also includes nearly $350B worth of short?term stimulus spending including extension of the payroll tax cut and unemployment benefits through 2012. However, with the presidential race gaining momentum, Congressional debate will likely hinder a quick agreement. For the week ahead, investors will take note of retail sales on Tue and Empire manufacturing and industrial production both on Wed. The week closes out with PPI, housing starts and weekly jobless claims all on Thu; and CPI and leading indicators on Fri.

EUR -The EUR rose modestly vs. the USD after the Greek government passed a second round of austerity measures amid violent protests. The relief?rally sent the single currency as high as $1.3283 overnight, within sight of last week's 2?month high at $1.3322. The austerity package, calling for deep cuts in wages, pensions and jobs, was viewed as pivotal for Greece to receive a EUR 130 billion bailout to avoid a disorderly default in March. However, Greece's ability to follow through with the austerity measures is being met with some skepticism as the country must demonstrate it can enact EUR 325 million in budget cuts before it receives the funds. Further, with elections planned in April, deep public anger could drive the government out of office and derail reforms. These concerns are leading many, including German Finance Minister Wolgang Schaeuble, to comment that Greek promises on austerity measures were no longer good enough after so many vows have been broken. Pressure on the euro is likely to remain as the Greek drama unfolds ahead of the March 20 deadline for bond payments.

GBP -The GBP is marginally higher this morning against both the USD and EUR after the Confederation of British Industry said that the UK will not slip into recession this year. After the BoE introduced a further GBP 50B for its asset purchase program last week, the encouraging assessment has led investors to pare bets that the Bank will introduce further rounds of stimulus. Investors will pay close attention to tomorrow's CPI report which is expected to show a significant decline to 3.6% versus 4.2% in the previous reading. While 3.6% is still well above the BoE's 2% target, easing inflation does give the Bank more room to stimulate the economy should they deem it necessary.

JPY -JPY is flat vs the USD and falling on the crosses following the release of bearish GDP data that saw a contraction in economic activity in Q4 2011. GDP fell by 0.6% q/q, double the consensus estimates of a 0.3% decline, while the previous period saw an upward revision to 1.7% q/q from 1.4%. Reductions in exports and government spending had the largest negative impact on the GDP figures. USDJPY remains at the upper end of its February range and technicals suggest that there is the potential for additional upward movement. The rally in USDJPY has resulted from market participants' reactions to Japan's weakened economic fundamentals, where poor trade data continue to impact the country's national accounts. The challenging economic environment will likely generate a discussion of further easing from the BoJ, which concludes its two day meeting tomorrow. Policy is expected to remain unchanged, with rates and asset purchases seen at 0.1% and ¥55trn, respectively. Commodity Currencies -The CAD rose to a threemonth high against the USD with the passing of the Greek austerity measures buoying demand for risk. Crude oil rose further supporting the currency. Only three days after surprising markets by leaving interest rates on hold, the RBA released a rather subdued monetary policy statement last Friday, highlighting that they were ready to cut rates if required. Trimming its near?term growth and inflation forecasts, the RBA also highlighted the ongoing two?speed economy, and warned of downside risks to world growth stemming largely from Europe's debt crisis.

MXN -The approval of Greece's austerity reform gave risk appetite a boost, with the MXN leading the LatAm currency gains against the USD. Domestically, the statistics agency reported Mexican industrial output rose more than forecasted, posting an increase of 0.9% in December. Last week however, the peso suffered its worst weekly loss in two months amid concern that Greece's austerity plan was not enough to secure bailout funds from the EU and IMF. Despite better economic data in Mexico, the peso remains highly dependent on the health of the US economy. The peso will likely gain on conditions that US data continues to improve and as the European debt?concern stabilizes.

RMB -The CNY remained relatively flat against the US dollar last week. However, yuan forwards declined after data showed China's imports slumped more than forecast and lending grew less than estimated. China's imports declined 15.3% y/y vs. expectations of a 3.6% contraction. Yesterday, Chinese Premier Wen Jiabao said that the government should start fine?tuning economic policies in Q1 because economic conditions deserve attention, further suggesting that the decline in imports may be concerning to China as the nation's consumption remains weak. China's trade surplus widened to a six?month high of $27.3 billion, suggesting that it may pressure the pace of CNY appreciation and delay a projected reduction in required reserves for banks.